Banks are being pushed aside in a rush by private investors supported by the government to provide funding for small businesses.
The Seed Enterprise Investment Scheme (SEIS) has stimulated a massive influx of money for start-up firms, thanks to tax breaks for private investors.
The Enterprise Investment Scheme (EIS) offers similar tax breaks for companies looking for cash from private investors to fund expansion.
Another government initiative providing much needed funds for businesses left out in the cold by the banks is the Business Finance Partnership.
The partnership has lent nearly £1 billion since March 2013 – with £145 million coming from the government and a massive £725 million from private investors.
Nearly a thousand firms have gained financial aid from the partnership. The bulk of the cash is in the hands of 18 businesses with an average turnover of £80 million, each employing an average 550 workers.
Just £50 million is financing another 880 businesses.
Search and rescue
Bond Aviation, based in Gloucester, is one of the largest companies to win funding from the partnership.
The company has won a tender to extend air ambulance service already offered across most of the UK to the RAF’s search and rescue helicopter units.
Winning the contract means providing bigger helicopters, more pilots, bases and staff around the country to give emergency cover nationwide.
The loan lets the firm refinance to release cash flow to grow the business
Other companies gaining investment include:
- Pure Gym – a firm with 50 fitness centres around the UK open 24/7 serving 250,000 members
- Cath Kidston – A chain of more than 100 shops selling clothing, homeware and products for children
- Bramley and Gage – A drinks company making gin and fruit liqueurs in Somerset which wants to spend £25,000 on increasing production
Chancellor of the Exchequer, George Osborne, told SEIS.co.uk: “The finance partnership shows how the government can open up financial sources for companies that they might otherwise never know about.
Pooled funds
“The government has confidence in business even if the banks seemingly do not. The quality of these investments has allowed us to attract five times as much private finance than the government is putting in.
“This is very exciting as businesses can grow and invest while a whole new private lending market outside the influence of the banks.”
Helping private investors pool funds to directly fund businesses with the lure of tax breaks and top-up finance for government is plugging a financial hole left by the banks pulling back from offering business loans.
